Obamacare and the incentive to work

Published February 8, 2014 - 1:02am

The Congressional Budget Office issued a sobering report this week that projected how many people will choose to work less because of the effects of the Affordable Care Act. CBO predicted the health care law will shrink the number of hours worked by the equivalent of 2 million full-time jobs. That’s about twice the impact the CBO predicted in 2010, when the law was signed.

That doesn’t mean 2 million people will be thrown out of work by Obamacare, as some critics asserted.

It does mean many workers will have less incentive to work. Some will gain welcome flexibility — if they clung to jobs just to keep employer-based health care, they will have access to coverage not conditioned on holding a job.

But, and here’s where the impact is likely pernicious, some will quit or work less precisely because they’ll now qualify for Medicaid or for subsidies under the law.

In effect, they’ll have a government incentive to be less productive.

Some higher-income workers also will have a disincentive — higher taxes under Obamacare — for providing more labor.

That is, a disincentive to work.

Government subsidies that persuade people to be less productive are not healthy for the nation. They’re also costly. Which goes to the more alarming news that came out of the CBO this week.

The CBO — as close as you’ll get in Washington to a nonpartisan source of information — released its federal budget projections for the next 10 years.

The prospect is bleak:

The agency projects annual deficits will stabilize through 2017 but then will launch into a long rise. By the most useful measure — debt as a percentage of our gross domestic product — the CBO sees that number rising from 72.1 percent in 2013 to 79.2 percent by 2024. That would be the highest U.S. debt burden since the years after federal borrowing spiked to fight World War II.

Deficits for the decade from 2015 through 2024 are expected to total $7.9 trillion, or $1.6 trillion more than the CBO last estimated. The agency also projects slow economic growth for the country.

The upshot: Right now, the federal government is running annual deficits lower than it did during the first four years of the Obama presidency. But our total debt continues to grow by huge amounts every year. As the bipartisan Committee for a Responsible Federal Budget said in reaction to the CBO projections, “Our deficit problems are far from solved and highlight the importance of putting the debt on a clear downward path, rather than settling for projection of stability. … The ideal fiscal plan would work to simultaneously lower debt levels and raise economic output.”

To the extent Obamacare requires billions of dollars for subsidies and also discourages workers from staying in the labor force, it’s sure to thwart both of those noble goals.

It was unfortunate some Republicans misrepresented the CBO report on Obamacare when they resorted to political shorthand. House Speaker John Boehner issued a statement saying the report confirmed the “devastating impact of Obamacare on jobs.” The Republicans should have focused on the costly incentives and disincentives to be less productive.

It’s also unfortunate a new Republican initiative on health care has drawn scant attention. Republican Sens. Richard Burr of North Carolina, Tom Coburn of Oklahoma and Orrin Hatch of Utah filed a bill that offers an alternative to Obamacare.

Their proposal would continue some popular Obamacare provisions.

Consumers could not be denied coverage because of pre-existing conditions, though they would have to be “continually” enrolled in a health plan to have that protection. The Republican plan would more narrowly focus subsidies on lower- and moderate-income Americans. It would free insurers to offer a wider variety of plans so people would have more price and coverage options than they have under Obamacare.

All told, the news out of the CBO this week points to the need to curb the cost and scope of Obamacare, and the even greater need to curb the federal government’s dangerous rise in debt.

— The Chicago Tribune

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